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Orchid Island Capital, Inc. Stock Price: Quote, Forecast, Splits & News (ORC)

Perplexity Finance

Company Profile

Orchid Island Capital, Inc. Price & Performance (ORC)

Stock Performance

Updated Apr 25, 8:00 PM UTC

Orchid Island Capital, Inc.

$7.28USD

+$0.35 (+5.05%)

After Hours

+$0.02 (+0.27%)

Open

$7.08

Market Cap

$780.87M

Year High

$9.01

High

$7.35

P/E Ratio

12.8

Year Low

$5.69

Low

$7.03

Dividend Yield

19.78%

Volume

5.62M

Latest News

Earnings Beat Propels Orchid Island Capital Shares Higher
Apr 25, 2025
Orchid Island Capital reported Q1 2025 earnings per share of $0.18, far surpassing forecasts of $0.08. Revenue soared to $19.71 million, well above estimates. The company’s stock jumped over 4% following the announcement, reflecting investor optimism about its strategic focus on higher coupon, shorter duration assets.123
Dividend Maintained as Book Value Slips at Orchid Island Capital
Apr 25, 2025
Despite a slight decline in book value to $7.94 per share, Orchid Island Capital maintained its monthly dividend at $0.12 per share for April. The company posted a total return on equity of 2.6% for Q1, and management highlighted cautious optimism amid ongoing market volatility and inflationary concerns.453
Analysts Upgrade Orchid Island Capital on Strong Q1 Performance
Apr 25, 2025
Following robust first-quarter results, Orchid Island Capital received an analyst upgrade and a new price target of $4.25. The stock has climbed more than 20% over the past two weeks, with technical indicators turning positive, although short-term volatility remains high and future price swings are expected.462

What's Happening

Peers

Earnings

Report Date

Apr 24, 2025

Reported Revenue

19.7M

Beat +64.89%

Avg 1d Change

2.41%

Report Period

Q1 2025

Reported EPS

0.16

Miss -11.11%

Implied Move 1d

10.12%

Transcript

12m 49s

Thank you, operator, and good morning. Thank you for joining us today. I'm sitting here with Jerry Cintas, our Controller and Hunter Haas, our Chief Investment Officer and Chief Financial Officer. We will follow by the way, before we start, I hope everybody had a chance to download the deck, which we'll be following over the course of the call So assuming you have that with you, we will be proceeding in chronological order. Just to give you a summary of what we'll do, we'll first have Jerry go over our financial results for the the quarter, I'll then discuss the market developments that shaped the decisions we did and the performance of the portfolio Then Hunter will dive into the portfolio and hedging positions, describe where we stand and what we've done. And then finally, I will do a kind of wrap up and then we'll open the call up to question and So with that, I will turn the call over to Jerry Sinton. Thank you. If we turn to Page five, we'll start with the financial highlights for the quarter. For Q1, we earned $0.18 per share. Compared to $07 in Q4. Book value at threethirty one was $7.94 per share compared to $8.9 at twelvethirty one.

14m 2s

Total return for the quarter was 2.6% unannualized, compared to 0.6% for Q4. And we declared and paid dividends of $36.36 cents per share for each quarter. If we turn to Page six, we'll go over some portfolio highlights. For Q1, the average portfolio was just under $6,000,000,000 compared to $5,300,000,000 in Q4. Our leverage ratio at threethirty one was 7.8 compared to 7.3 at twelvethirty one. And prepayment speeds were 7.8% at Q1 compared to 10.5% for Q4 Liquidity at threethirty one was 52.2%. Compared to 52.9% at twelvethirty one. On page seven is our summarized financial statements. We you can read at your convenience and I'll turn it back over to Bob for market development discussion. Thanks, Jerry. And before we move on to the market development, I just want to apologize. In our initial release back in the month, I think it was on the ninth when we released our preliminary earnings per share in book value numbers, we have the breakdown of earnings per share between net interest income and capital gains and loss reversed. And it implies that the capital gain component was the larger of the two and in fact it was the much smaller As we show in the press release, it was roughly a little under $0.2 for the capital gains and the rest of it was from the interest income.

15m 47s

So I do apologize for that. Turning now to Slide nine, It's been Q1 was actually very much continuation of what we saw in Q4 absent what happened very late in the quarter and then, of course, very much changed a lot in early April. So just with respect to Q1, as you see on the top left, you can see the red line there, that's just where we were at the end of the year. And we had a significant rally in cash treasury curve, the green line. And then since quarter end, we've had a significant move. With respect to the tariffs and their expected impact on the economy and inflation, the market moved to price in three Fed cuts or three plus Fed cuts by the end of the year. In the long end sold off quite a bit. The initial concern was that this was foreigners dumping treasuries, with the safe haven status of the dollar and U. S. Treasury somewhat doubt Not so sure now that that's the case. We did see earlier this week the results of last week's auctions last specifically the ten and thirty year. And there was really nothing that changed with respect to foreign participation in those auctions.

16m 58s

But what we have seen in long end pressure, there's probably a couple of trading trends that explain that. One is what are known as basis trades with respect to the futures market. They're typically very highly levered trades put on by hedge funds. And when they have to delever, they involve selling the long end quite a bit Another is just the fact that with the forced selling that was caused, by the disruptions in the market, dealers had to take a lot of bonds onto their balance sheet and that tends to one, just selling of treasuries or any instrument that was liquid enough to be [indiscernible] But also when dealers take on a lot of positions on balance sheets, you typically see movements in swap spreads downward, more negative in the fact, if you look just to the right, you can see what happened to the swap curve. It's notable, well, two things. One, if you look the movements over the course of the quarter from twelvethirty one to threethirty one, similar to what happened in the cash market and of course what happened since quarter end kind of mirrors that as well. But notably, the absolute numbers are much lower.

18m 5s

So swaps spreads move meaningfully negative late in the quarter and into April. And that had a lot to do with mortgage performance, which we'll get to in a minute. In fact, arguably, movements in swap spreads are the biggest drivers of mortgage performance today, and we'll talk about that, as I mentioned. Moving on to the next slide on Slide 10. As you can see at the top, this is just the spread of the current coupon mortgage to the ten year Over very large periods of time, that's probably the most appropriate benchmark. But more meaningfully of late, it's really the five year just because the current coupon mortgage is a higher coupon premium or premium, but higher coupon security. And it has a shorter duration than a ten year. So really, if you look at this versus five year, you would see that the spread had widened out quite a bit because basically looking here, you would say that we really widened that much. However, as I mentioned previously, swaps spreads are very negative. If you look at the spread of the current coupon to benchmarks of the swap curve, that spread is at very wide levels.

19m 9s

Widest we've seen probably since the outbreak of the COVID pandemic. The bottom left, you can see the performance of mortgages. Absent what happened in late in the quarter and early April did quite well. In fact, if you look at the Bloomberg indices, mortgages, agency mortgages were the second best, in the fixed income markets behind only tips. And as you can see here on the left here, as we approach late February into March, the market was rallying. Mortgages did very well. Orchid did well. Most of our peers had solid positive returns. And kind of characteristic with mortgage market as a whole. To the right you see the role market, I'll point out a couple of things. On the left two thirds of that slide, can see during most of 2024, roles were not very attractive. That did change quite a bit in the first quarter. They became did quite well. That also just helps the class as a whole. There's a lot of that drive roles, one of which is just a technical supply and demand such that if there's demand for mortgages in the front month, but there's not a lot of supply The price of the front month mortgage can get bid up and the drop appears to be larger and that gives you a nice attractive role.

20m 23s

Most of what we saw in the first quarter was actually demand from CMO desks mortgages as they were generating, precedent lease high levels of CMO floaters, mainly for the banking community. That helps support the role. It did fall off quite a bit as we enter April. Now just moving on to Slide 11, volatility, as you can see the top slide is quite high. This top slide is a twelve month look back. We are at the highest levels for that period. I would note that the VIX, which is equity vol, was also very high. In correlations, which we typically see that have been in place for decades between bonds, treasuries rates, treasuries in particular, and equities, has really broken down to a large extent over the last month or so. So for instance, when you would typically have equity weakness and a flight to quality bid, you would see treasuries rally. In fact, saw just the opposite. And their correlations have become more positive, is very atypical. Just looking at some perspective here on the bottom, just shows this ball levels going back ten years. And you can see where it quite high levels. That big spike you see in March 2023 is the regional banking crisis.

21m 37s

And then back in March of twenty twenty, that's the COVID pandemic. So the fall has generally been elevated. And outside of the regional banking crisis, the current level of vol is really at the highs of the rates that we've had for the last few years. Now moving on to Slide 12, and this is a new slide This shows swap spreads, as I mentioned, they've moved quite a bit. So what we show here are just four different tenors. The top one is the two year. The orange line is the five year, the green line is the seven year and the blue line is the ten year. As you can see, they have moved dramatically and become quite volatile of late. So there's two takeaways from this. One, if you have new capital to deploy today and you're looking to hedge that with swaps, the investment opportunities are phenomenal. Extremely attractive spreads, the wider spreads we've seen in quite a time. The flip side of that is if you entered this period, by hedging with swaps, it might have been painful. Hunter is going to talk at length about what we've done in the portfolio. I will just give you a brief executive summary.

22m 40s

What we generally did when we raised quite a bit of capital during the quarter. We deployed a lot of that proceeds into higher coupon but shorter duration assets. So shorter duration assets and we hedge them predominantly with longer duration hedges. So the combination of a short duration asset being hedged by a longer duration hedge means that you don't need as much notional to do so So that mitigated our exposure to these decline in swap spreads. And going forward, we would also change the mix, not as much swaps. We've used more treasury futures. And so if you, for instance, look at our swap notional versus our repo balance, it's much lower. And the reason is, the repo balance tends to track your asset size. But because the asset mix has moved to more shorter duration assets and we're using longer tenor swaps or futures, the notionals are low in relation to the repo liability. Moving on to Slide 13, this story hasn't just remains the same. It's just what we've been experiencing for quite some time. The top left, the blue line there is just the refi index we were at historically low levels and the red line is mortgage rates, they are very, very high.

24m 1s

And it's keeping refinancing activity low. If you look at the bottom chart, you can see that the percentage of the mortgage universe is refinanced was very low by historical standards. The top right just shows the primary secondary spread. That's chart is somewhat misleading. It just reflects the fact that one rate have been very, very volatile but also we have rate data on minute by minute, day by day basis. Mortgage rates, we don't get the data as regularly. And so sometimes you just have timing difference differences where you can lead to appearance spikes down in the primary, secondary spread basis, but that really has been fairly stable. One thing with respect to spreads, do want to mention is that, as you can probably heard, the merge between Rocket Mortgage and Nationstar, this is the potential to definitely increase speeds or hurt the convexity of the mortgage universe. We have added a slide to the appendix, which we will talk about later, Slide 28 and it basically breaks down our exposure to loans serviced by Nationstar And obviously, there's the potential for this development to affect performance and the pay ups. For specified pools. But as of yet, we really don't have any hard data point to, so that's still TBD.

25m 17s

Slide 14, I really have much to say about that other than just shows you the long term historical relationship in between nominal GDP and the money supply and as you can see, as the government's been running massive deficits of late, money supply is very far above its long term trend growth. And as corresponded into higher GDP growth. With that, that's it for the market, and I will turn it over to Hunter. He will go through the portfolio.

25m 46s

Thank you, Bob, and good morning. We have a lot to discuss this morning, and very busy, quite active in the capital markets in the first quarter. And so I have a lot of updates for you. We also want to be mindful of letting our shareholders as well as our as well as the counterparties with which we have credit relationships know what measures we've been taking to safeguard ourselves from recent market volatility. As such, I'll be discussing activity in several metrics that are as fresh as last night's close. And I just want to mention that's April 24. So, I to reiterate that how important it is that these discussions relating to activity this month are our company's best estimates and our internally generated, unaudited, subject to change and the things that Howard said in the safe harbor discussion at the beginning of the call. So with that, on slide 16, as I mentioned, we were quite busy We raised quite proportion to our size or quite a bit of capital in the first quarter. Dollars $2.00 6,000,000 worth. In fact, we sold 25,000,000 shares of stock. We estimate that the that the the shares that we sold were a little bit accretive, slightly accretive to shareholders and so above book value in the in the aggregate, net of any fees we would have had to pay.

27m 24s

With that said, as the market became more volatile coming into the March and really more so in April, the stock price just didn't perform very well. And we implement we reactivated our buyback program April month to date, we've repurchased over $1,000,000 1,100,000.0 shares of stock. We did so at a weighted average price net of commissions of $6.44 at a time when [indiscernible] spotted our book value at roughly $7.36 give or take. So there's a that buy back was also quite accretive to shareholders' equity. Getting back to the portfolio and what we did with that capital that we raised in the first quarter we bought quite a bit of Fannie five and a half, sixes, and six and a halfs exclusively those three coupons. We did early in the quarter, we have been carrying $200,000,000 Fannie three short just because that roll was trading really poorly. It firmed up a little bit. And we found some slow paying Fannie threes that really weren't doing anything for us. More or less just delivered them into that TBA. I think we've a little bit of pay up for pools we sold, but we just sold them on swap and took a little pay up in.

28m 51s

Reduced our exposure to Fannie threes by $200,000,000 and, really sort of help the carry of the portfolio overall. So going back to the capital new capital, we added approximately $3.00 6,000,000 Fannie five and thirty year 5.5 Those were all either New York or Florida pools. We were kind of on to the Florida story, I think relatively early. And I think that those are going to be good assets to hold especially in the premium space. We added a lot of thirty year sixes. Predominantly Florida's and low loan balance pools and kind of the 200 to two seventy five ks max range and some FICOs. And we also added $458,000,000 And fifty thirty year 6.5% s. Again, those were the same sort of combination as the six is two twenty five ks's, Florida, FICO. During the month, we also put on a little bit of a basis hedge of what we hope would be a little bit of a basis hedge in a door 15 fan 5.5 swap. We like that for times when mortgages get a little too snug, as they were. Really in going into February. With respect to the going back to slide 16, sorry.

30m 23s

I just wanted to point out one more thing. Or two more things. The lack of the portfolio importantly, the December, was five zero three. As you can see, the result of our the securities we purchased in the quarter that drifted up to five thirty two. And we have sold some assets since the end of the quarter and as so the lack of portfolio has drifted up a little bit more. And that leads me to some activity that's taken place since the end of the period. We sold roughly $692,000,000 worth of securities basically to get our leverage back into check. Our leverage at the December was seven point three seven point eight at the end of the first quarter. And I spotted it last night at 7.4. Just to kind of carry through that thought. We you have a choice to make anytime that you suffer some losses and we the portfolio is down in value. We estimate that portfolio was down, book value was down roughly 8.3% as of last night. And so, you know, as as we move down to book value, experienced some losses, you have the choice to either explicitly let your leverage ratio rise or you know, mitigate that by selling some some securities.

31m 59s

We thought it would be prudent to go ahead and sell some bonds. And so the ones we sold were lower carry assets, lower coupon, as I discussed, the lack of the portfolio drifted up slightly because of what we sold. We sold $353,000,000 Fannie Force. [indiscernible] five and a halfs. We also put on TBA hedge, shorting 200,000,000 more Fannie fours. I would look last night, think they were maybe four or five basis points tighter on a mortgage swap basis than what they were at the time that we that we execute these sales. And the market is swung around violently since the first few or first couple days of this week. And and so, you know, we're starting to recover some. We're The past three days have been quite positive for mortgage assets. And so we jump back into those securities as things if it's as and if things continue to quiet down volatility drops, portfolio gains value and our leverage ratio would then, you know, start going lower and lower. So we like where we are positioned, kind of mid sevens leverage ratio. We're comfortable with that. Our liquidity position is actually a little bit higher than it was at the end of threethirty one.

33m 35s

And so we feel good about the risk of a portfolio. And the steps that we've taken to mitigate potential for future losses. Slide 17 is just kind of a rehash of the portfolio strats that we've just discussed. The funding has funding on slide 18 At the end of 12/31, our weighted average repo rate was four forty six. [indiscernible] Four sixty six. I'm sorry, four sixty six. Four forty six at the March. And as of last night, the weighted average repo rate was four forty seven. So not a lot of change there. We have not seen a change in material changes in haircuts or [indiscernible] counterparties pulling back from the space, so far at least. So, I think that people are in our space are reasonably well positioned and while we might incur some losses it's nothing as dramatic as it was say during COVID times. But, you know, who knows anything can change, right?

34m 49s

So, the average term for the repo book was also twenty six days at the December, forty days at the March and is currently forty days at March and is currently thirty days right now. So a lot of changes to report in the [indiscernible] Side of the house. As it relates to slide 19, we talked about our hedges. Of course, I mentioned we unwound several mortgage securities type several different mortgage securities. The also unwound a number of swaps to offset that risk. We'll just kind of go through some of the hedging activity that we did in the period. Early in the quarter, as expectations for for Fed cuts were low, The Fed funds curve was very flat really with only one full cut priced into 2025 to 2026. We use that as an opportunity to unwind $500,000,000 one and two year swaps. On the very front end of the curve. We move that duration out the curve to kind of ten year point And then as we added assets during Q1, we predominantly hedged them with a mix of 5s, 7s and 10s, skewing a little more heavily towards the 7s and ten year and skewing more heavily to swaps than treasuries. [indiscernible] shorts on the ten year ultra futures.

36m 26s

Late in February, early March, the market had gone from pricing in only one cut to 25 to 26 to almost four. And so we reestablished a hedge on the front end of the yield curve to economically lock in those projected Fed cuts. We did so by adding two years SOFR future strip and I think $115,000,000 and $250,000,000 six months by two year forward starting swap. Those are done at rates around three sixty. Because I think the yield that we were that we were that we have achieved on the incremental capital that we put to work was in the five kind of 60 area whereas the legacy portfolio is quite a bit lower than that. [indiscernible] where we got in and where we've been able to hedge our funding costs Slide 20 is just more of kind of the of the hedge picture. We you can see this the stats come through most of this. We've as I mentioned, we we we added some five, sevens, and tens. Since quarter end. So this gives you a breakdown of the portfolio from twelvethirty one or from the hedging book from twelvethirty one to threethirty one. And subsequent to that, most of what we've done on the unwinds has been in the eight and nine year quarterly curve.

38m 8s

So we we are around $474,000,000 seven and eight year payer swaps and REIT shortage 200,000,000 candy floors. Slide 21, I'll just leave this with you. It's just like what the return and risk reward comparison of the coupon stack. This is generic TBAs and this isn't really specific to our portfolio, although we do a little confusing. We do add our portfolio allocation over the end. These are just generic TBAs. Of course, our portfolio is constructed almost all specified pools that have some sort of story to them. So we don't really have anything that's gives them lower pay up bonds, which is a lot of what we sell in times like April within distressed periods. [indiscernible] we don't have anything So would really call TBA ish. The page 22 is our interest rate sensitivity profile. It has a DV01 of the portfolio listed there as well as kind of the the dollar and percent change of up and down 50 shot. I just note that since, the end of March, number one, this was at the March, this was very flat. This won't guard against basis widening that we've seen. All of our losses that we've experienced in the fourth quarter are the second quarter have been attributable to basis widening.

40m 2s

This profile is even more flat as of yesterday. It's down 0.05% and down 50% and down 0.24% in the up 50. We keep an eye on this every day. As well as several other risk measures. Slide number 23 is our prepayment experience. As you can see, speeds were 6.2 in JN, 7.3 in Feb, and nine in March. On an average basis for the first quarter that was 7.5%. Versus 10.2% in the fourth quarter. I would note that as we've added assets that are higher in coupon, we're going to start seeing that speed probably creep up a little bit. And April's was jumped up a little bit. It was 9%. How that relates to our book value we had had in January $1,200,000 worth of accretion. So our discounts were paying fast enough that they overwhelmed [indiscernible] the pay downs associated with our premiums to the tune of $1,200,000. So pay downs actually helped us in that case. February, that number was $800,000 March, it was $6.40. And then as I just alluded to, we've skewed up up much higher in coupon over the last over the course of the first quarter. So, we had $325,000 worth of pay down related amortization in the month of April.

41m 46s

That's about all I have for you, so I'll turn it back over to Bob. To give you the outlook and the Q1 wrap up. Thanks, Hunter. Just to summarize, kind of looking back Q1 the most part was a very good quarter. Mortgage performance was very strong. That was reflected in the price of the stock as well. We were able to raise capital on an accretive basis. And we did take some meaningful changes to the portfolio and we're happy with how we've repositioned the portfolio Looking forward, tons of uncertainty The market has become quite volatile. The driver of the volatility, as we all know, are of course the tariffs, and the impact they will have on trade relationships, inflation, growth, but also the fact that lot of this information as we all know comes out kind of in the form of headlines. Which means they're kind of hard to predict. It's not like regularly scheduled economic data that's actually taken a big back seat to these developments. In fact, given the fact that most of the economic data is backward looking, it tends to be disregarded by the market for the most part. And everything is focused on everything with respect to trade, tariffs, and so forth.

43m 3s

Clearly, market has taken all of this to and process that and try to guess what this means going forward. Obviously, the tariffs are expected to have some potential impact on inflation. Drive prices higher, at least in the short term even if it is a one time shock in nature, remains to be seen whether or not it plays out in that regard. But in any event, it's expected to be at least short term inflationary but also drive growth slower. We've already seen the economy being resilient, but not robust. And these events are likely to cause us to slow As we mentioned before, the market's pricing in three or four cuts this year. Maybe as soon as June. And so you expect this combination of slower growth, which would put upward pressure on the unemployment rate, and tariffs and pricing pressures, put upward pressure on inflation. Those work against both of the Fed's mandates. The Fed is clearly in a in predicament here. In any event, we don't know with any degree of certainty. We have no basis of having any conviction in our outlook in terms of how exactly this is going to play out. It's just too volatile and too much remains to be seen.

44m 18s

But as I mentioned, the kind of general takeaway from this is it's probably slower for growth. There's potential for Fed eases. And it's going to push inflation up, which would tend to push long term rates up Both of those developments lead to a steeper curve which is good for us. So if you look at the way we're positioned with a skew towards higher coupon, shorter duration assets, that generate lots of carry hedged on the long and predominantly [indiscernible] assuming the steepness of the curve, should work quite well. We're very happy with our position, but we also are very, very aware of the fact that this can all change And we as like everybody else are just watching the market every day and just interpreting the events as they occur and hoping we can be positioned or repositioned in effectively and quickly as possible. But by and large, we are all things considered, happy with our positioning. And that's about it. With that, we can turn the call over questions, operator. So that is all of our prepared remarks.

45m 25s

Ladies and gentlemen, if you have a question or comment at this time, please press question has been answered or you wish to remove yourself from the queue, simply press 11 again. Once again, if you have a question or comment at this time, please press 11 on your telephone keypad. Please stand by while we compose the Q and A roster. Our first question or comment comes from the line of Jason Weaver from Jones Trading. Mr. Weaver, your line is open.

45m 57s

Thanks. Hi, guys. How are doing? Thanks for the time. First of all, can you tell me where you see your duration gap both at the end of the quarter and to date after sales you've made?

46m 11s

We don't do that Hunter mentioned that we don't look at it in terms of just numbers. We do it in DV01 basis. And I think on Slide 22, we have that as [indiscernible] 2,000 So that would be $13 It's very narrow. And I think you mentioned it was about the same as of now. Yes, it's very, very flat. It's slightly we're kind of in this convexity elbow. So we have a decline in value in this 50 basis point shift. If we narrow it in a little bit more, the duration VB-one hasn't changed materially since the end the quarter.

47m 1s

Got it. I was just thinking about how you made the comment about how you're hedging with longer dated swaps, and I didn't know if that had changed post quarter end. But it seems like you would benefit from a seasoning action in that.

47m 13s

Yes. Yeah. Got it. We unwell. And just predominantly longer assets Most of what we unwound was in [indiscernible] 5.5 is a little closer to par, but like I said, think we really only had to unwind two swaps and one was a seven year and one was kinda a two year old 80. It'll be the one Two two year old ten year. Yeah. So Ilya, Two other than that, yeah, we we didn't really have to unwind anything. And it adds some TBA hedge as well. So [indiscernible] And just one more clarification. I heard you mention your quarter to date book value was 8 something and I got cut off.

48m 4s

Yeah. Let me just go through that. So I know a lot of our peers have already reported and they reflected their book as of last Thursday. Our book last Thursday estimate was $7.24, that's down 8.8%. We had a rough day Monday, but market's been good since then. So as of last night, our estimate is $7.28 so $0.4 of above where it was last Thursday. And that equates to a decline of 8.3%. Quarter to date. And as we mentioned, our leverage ratio is about 7.4%, it's actually lower on the quarter.

48m 40s

Got it. Okay, that's very helpful. Thanks for the color, guys. It's worth throwing in I always like to mention the total returns as well when we talk about book value because our dividend is relatively high. So when we think about the total return was, of course, it was 2.6% we mentioned for the first quarter, Quarter to date, we the change in book value reflects the dividend accrual. So it's dividends has been taken out of book, if you will. And so the total return puts puts the dividend account for the dividend that's going be paid in May. Is 6.8%. Quarter to date. And year to date having the benefit of three more months worth of dividends our total return is negative 4.08%.

49m 32s

Got it. Thank you for the time.

49m 35s

Yep. Absolutely. Thank you. Our next question or comment comes from the line of Jason Stewart from Janney Montgomery. Mr. Stewart, your line is open. Thank you. And thanks guys for all the color as usual.

49m 48s

Question, after these portfolio changes and hedge changes, where do you see gross ROE sitting today? Well, swaps, very, very high. Mean, take your moment because they're very volatile. But I would say 20%, I don't have numbers in front of me, but they're these are the highest levels we've seen at some time. [indiscernible] Look at the spreads. Seven year swaps versus current coupon is above 200 basis points or I don't know what it is right this second, but has been over the course of last week or so. Like I said, it's very volatile. So, [indiscernible] a mark to market basis, It wasn't quite that wide at threethirty one. [indiscernible] going forward if we were say, putting new money to work, you know, I think very high teens and even in the low twenties is probably achievable. With our in the context of our leverage framework that's our current leverage framework.

50m 56s

Got it. Okay. Thank you for that. And then, as it relates to to that return environment and your cautiousness going forward in terms of spreads, capital raising activity versus buybacks and the dividend, it kind of seems like cost of capital is a little north of of where the returns are. You know, how are you looking at the dividend issuance and buybacks [indiscernible] Let me see, to start with, where the stock's trading now, obviously, buybacks off the table. We We got so cheap there that we just in spite of the we basically waited for the market to calm down. We felt somewhat comfortable using some cash to buy back stock we did. Given where we're stocks trading today, we're not far from book. We would I would say that going forward, assuming nothing changes from where we sit today, which is a big if, but we will even consider raising some capital just if nothing else to pad liquidity. Not so much to miss as much as the market's appealing, and we would love to put money to work, we would also be cognizant of the need maybe just to add some liquidity, just because you never know when the turbulent period is going to come back.

52m 17s

But even if you do, I mean, investing at these levels the yield on the stock got don't remember what it was at the lows, I assume mid-20s. When we were trading in the low sixes.

52m 32s

It's come up, so it's not as heinous the yield, but these are pretty attractive returns. [indiscernible] I know this question comes up a lot when people look at the dividend yield and so forth. A component of the dividend that we pay and have always paid is derived from hedges, in particular closed hedges. And so that's you can't ignore the fact that when you put on significant hedges and then close them out that they have a lasting impact on your tax borrowings because the gains on those derivatives at the time you close them amortized basically over the remaining term of that hedge. I know us and our peers in the past have talked about the benefit of these closed hedges.

53m 18s

But that that's coming out of book value. Those dollars are no longer present on the balance sheet. Right? And so if you look at the dividend that's paid versus taxable earnings, it looks like it's fully covered, but not necessarily by current period GAAP earnings. So I wanna make that distinction What you can earn today on forgetting the effective hedge and hedge accounting and tax accounting, is extremely attractive if you're hedging with swaps. And we really like I said, we haven't seen anything like this in some time. So Yeah. I'd just reiterate that point. It's you know, companies in the space talk about earnings available for distribution and and those those types of non GAAP metrics. We prefer to talk about tax, I guess. And for tax, you defer the the benefit of those closed hedges and realize them over time. But for GAAP, once it's mark to market, it's coming out of book value. To the extent that you have it in the money swap, whether it's open or closed.

54m 28s

Yeah, that's just slightly different way we different tack we take on how we approach that.

54m 34s

Yeah, I guess just coming back to the economic side of it though. I mean, the dividend on a book value basis compared to the marginal return, it seems like once you take out operating costs, I don't I'm struggling to see why raising capital here is accretive on an economic basis. Relative to the dividend unless you're obviously change the dividend.

54m 57s

Well, like I said, the dividend that you're paying is closely related to taxable earnings. So but you're not some of that's coming out of book. Because it's closed a component of that are the deferred interest expenses associated with hedges that have been closed. And that's coming out of book. Simple as that. You you don't those dollars are no longer here. Let me explain another way. Let's say you have a billion dollar portfolio and you hedge it. Let's say the market sells off and the value of your assets goes up by 100,000 and the value of your hedges goes up by $100,000 So there's no impact on book.

55m 37s

Right?

55m 38s

Now let's say shortly after that you close those hedges The value of the open in that hedge, 100,000 is amortized against interest expense over the balance of that hedge period. Right? However, in my example, you had $800,000 gain on your hedge, and $100,000 gain or loss on your assets. Now let's assume that your counterparties are efficient with respect to margining activities. So in other words, your hedges went in your favor by 100,000 you called in 100,000. Your assets went against you by 100,000 and your counterparties called you for hundred thousand dollars. So your net economic impact of that is zero.

56m 26s

Right? 100,000 went in, hundred thousand went out. So your cash balance is unchanged. For tax purposes, that hundred thousand dollars of gain on those hedges if you close the swaps at the end of that period, is amortized against interest expense for the remainder of that term. Let's say it's a ten year swap. Going to reduce interest expense over the remaining term of that ten year swap by $100,000 You don't have that in book value. Right? That 100,000 was sent out to your asset counterparties when they called you. But it's a component of taxable income. So you pay a dividend based on that. And you say, well, look, the yield on that dividend is so high why would you raise new capital?

57m 13s

But how much of that that dividend, which is a byproduct of tax borrowings, is actually being earned in the future. It's coming out of book. Yeah. So you have to look at what are you gonna earn on a purely economic basis versus what you're paying on a purely economic basis, apples to apples. And it is higher. On the current market. I guess I would just add that the portfolio hasn't changed so much that and it could very well change. We have to cut the portfolio more we might get into a position where we're not earning as much. But [indiscernible] outlook now is that we have a tax obligation. We have a distribution obligation to pay out taxable income as we, as go through the course of this year. And part of that is attributable to things that aren't on the books anymore. So we don't have a lot of leeway there. We can either pay taxes or we can pay a dividend. With respect to your question about whether or not it's prudent to raise capital, I don't think either one of us were trying to say that we're a % going to be doing that.

58m 24s

You know, the market's been very volatile. We're just pointing out the fact that we are trading close to book. Closer than we were, especially when we bought back shares. I mean, we bought back the shares at $6.44 after commissions, book value we estimated at that time was around 7 mid-730s, right? So was enormously accretive. It's much less so now is the only point.

58m 51s

Yeah. I got it. And I I understand the accounting. One last just question, and then I'll jump out. So the expectation is that at the current dividend level, and based on your taxable earnings outlook, 2025 dividend would be 100% taxable income and not return to capital?

59m 9s

Certainly not gonna say that in late April. I did mention earlier this year with respect to 2024, the think it was 96%. Of the 2024 dividend was taxable. At this point, I would say that does not appear to have changed. But we've got a lot of months to go and we have no idea what's going to happen. The last thing I want to do is say a recorded earnings call, that our dividend is going to be all taxable earnings for 2025. I have no basis for making such a statement. Year to date, what ended in what was the case in 2024, Has been the case. In other words, percentage of the dividend that's taxable earnings is retained and stayed in that level. The balance of the year is completely uncertain.

59m 58s

Yeah, year to date, we've our taxable income has been right on top of our distribution. So you know, and those are massive estimates at this point in the year. So, but we're not formally, you know, doing this, but we do keep track of tax on a month to month basis. Every time factors come out and and so far, the distribution has been, right on top of [indiscernible] Alright. Alright.

1h 27s

Thank you. Yep.

1h 32s

Thank you. Our next question comment comes from the line of Mikael Goberman from Citizens. Mr. Goberman, your line is now open.

1h 41s

Hey. Good morning, guys. Hope you're doing well.

1h 43s

Not much for me given all the hey. Not much for me given all the terrain that we've already covered. But if I could ask, you mentioned slide 28 in the appendix. Just maybe some thoughts on the Rocket Mr. Cooper deal and how that affects what prepay speeds in the MSRs there? Thanks.

1h 1m 11s

Yes. So just I did want to go over that and I glad you brought it up. So on the bottom of the slide, it just shows you by coupon the dollar amount of loans serviced by Nationstar versus our total holdings in that coupon. As you can see, runs in the high single generally high single to low double digits. I think what's constructive to consider is what percent of the universe is serviced by Nationstar And how do we stack up? So for instance, let's say that in the 6% coupon, across the cohort, Nationstar service 15% and only 12.1% of ours are. So that's somewhat beneficial position to be in. So that's just kind of observation.

1h 2m

We know that Rockets are very fast servicer and we presume that once they start service they're going to get faster. So the convexity of the mortgage universe will be in impacted in a negative way. We own specified pools, specified pools traded at pay up, reason they trade at a pay up is because if a relatively slower speed. Now in this case, it remains to be seen Certainly the specified pulse would be expected to pay faster because more of them are going to be serviced by Nationstar. Same with respect to the TBA though, the underlying cohort. So they're both going to get faster. The question is, does the relative speed stay the same? In other words, does you know, 50 ks six pay at 80% of TBA or is it pay at 90? That will determine over time how TBAs evolve That remains to be seen. But there's no question that having rock service a greater percentage of the mortgage universe is not a good thing from the perspective of the convexity of the mortgage universe. Yeah, I would just add that we have a lot of discounts. Think this slide kind of alludes to the fact that at the time we put this together at three thirty one, five and a halfs and below were discounts and six, six halves and sevens were premiums.

1h 3m 19s

So we have a little bit of exposure in the premium space, but will also notice the rockets are faster for out of the money borrowers as well.

1h 3m 29s

So, a mixed bag and PPD, I don't it's today's problem that might be coming down the pike in a few months as the transfers have occurred and the loan officers are able to you know, start using Rocket's technology to try to refi people. So, I'm not terribly worried about it. We did see in the GSEs sold some pools earlier in the month. Fannie Mae didn't really restrict the percent of Nationstar on their list. Don't it may have even come out before the announcement. But and then Freddie was Freddie pulled back, and limited the amount going into the cash window pools to 10% going forward. I think they've indicated that going forward, they're gonna they're gonna keep that rule in place. We have some things to do to the extent we have a few pools that are, you know, high nation star percentages. We combine them with other other pools we own and get the, you know, kind of the percent nation star slash rocket down. I don't expect it to be a material impact to the portfolio.

1h 4m 41s

It's been certainly something to talk about though.

1h 4m 45s

Great. Thanks for that. And just to follow-up on a piece of that. A slide two slides prior to that. Given perhaps expectations that the margin for Fed easing at some point, what are your thoughts generally on the MBS supply going forward if that were to happen?

1h 5m 8s

I wanted to mention this. The one thing we don't have in our slide is affordability. Which as we all know is extremely low. And if there's any credence to the argument that these tariffs are going to be harmful to growth, slow growth, drive the unemployment rate higher I don't see supply getting too high. I mean, as far as the coming summer, I would expect it to be a below average supply [indiscernible] And you know, there's just a combination of too many factors working against it. Affordability is low, rates are still high. If there's inflationary impacts on these tariffs, it's going to keep the long end higher And if you have people worried about their jobs, that's not good. And one thing that's interesting, you mentioned that the home sales data that came out New home sales, I don't know what the change was month over month, but if you looked at the details, the number, absolute number of new homes for sale is the highest since 02/2009. We all know what happened in 02/2008 and 02/2009. That's not a good sign. [indiscernible] there's builder buy downs, that's very prevalent. They can support the market that way.

1h 6m 28s

But I don't think we're going to have a huge surge of supply. [indiscernible] totally agree.

1h 6m 36s

Alright, guys. Thank you very much as always and best of luck going forward.

1h 6m 41s

Thanks, Mikael.

1h 6m 43s

Thank you. Our next question or comment comes from the line of Eric Hagen from BTIG. Mr. Hagen, your line is open.

1h 6m 51s

Hey, Eric.

1h 6m 52s

Thanks, guys. How are we doing? Hey. Good to to hear from you guys. I want to ask about whether you think the level of spreads has reset higher, wider as a result of the tariff war?

1h 7m 4s

Like in a scenario where interest rate vol comes down and spreads tighten, like what do you think the level that we could tighten to is and has that level changed?

1h 7m 12s

These last few weeks? Well, for pre COVID it was 80. I don't think we're going there. We haven't seen on slide 26, have been not very aggressive participants They used to be kind of the backbone bid Money managers were very supportive of late. They've had redemptions. They haven't been tighter I don't have to depends on your benchmark, obviously swaps spreads a wider number than the ten year or the five year. I think tightening, but I think we're going to have a outsized tightening. Yeah, it's tough to say.

1h 7m 51s

Like on an OAS basis, versus treasuries, mortgages don't look nearly as compelling as they do versus swaps. That's because treasuries have almost kind of traded like a risk asset here.

1h 8m 4s

In this more recent move in April. So you know, there's could certainly be constraint just owing to the for entering a period of where the market expects increased volatility, that's certainly not good for mortgages and that could keep spreads on the wider side. But it's been amazing to see how with one tape bomb, you know, things tighten back up. So, you know, [indiscernible] [indiscernible] you know, 04/21, it was looking pretty bleak and then things have just we've come back as much as 26¢ in a couple days very quickly. So so, yeah, I think that comes kind of full circle, I guess. If this is going to be how things are, then I think in are gonna demand, a wider spread to deal with that uncertainty. The ability for them to take leverage down to a more appropriate level for this type of volatile environment. I would say one thing, this is purely speculation, though. But if there is really a softening economy and it really truly weakens Mortgages could just benefit from spread widening in corporate bond market, high yield and investment grade. They could be deemed to be more of a safe haven asset that could be beneficial in the short term.

1h 9m 33s

Especially if long end stays high and speeds are slow. You can see that in the near term. Money managers making relative value allocations, but they were pretty overweight mortgage not long ago. Don't know how much more they could go back the other way from where they are now.

1h 9m 51s

So, no, I don't I don't see any catalyst for us materials tightening. The near term.

1h 9m 59s

Okay. I appreciate you guys. What are your thoughts on buying swaptions and just the overall cost of hedging volatility right now? Like do you feel like you have the flexibility and the liquidity hedge well if you wanted to? Or are we basically kind of like getting the 20% yield as a result of sort of not hedging that volatility risk?

1h 10m 21s

Well, it's expensive, right? So yeah, that Right. [indiscernible] in February.

1h 10m 28s

Yeah.

1h 10m 30s

Put that on now would be pretty pricey. Oh, we do. I think, as you know, we have in years past, we're quite active in, long trades. Really caught off guard by feeling pretty good about the world coming into this the first quarter of this year. So, you know, certainly didn't see the market reacting to the, you know, the tariff of tariff talks and threats as well as they did particularly in the treasury market. So we yes, it's something that we looked at a lot. We spend a lot of time on trades that we don't execute. We had a great one that we looked at. Perfect for this scenario. We've executed dual digital options in the past whereby rates up or down and equities down as well. We had one that we evaluated in December. Opted not to do it. And kicking ourselves a little bit for that. But, yes, we will try to be more cognizant certainly of volatility. I just think it's it's tough to to leg in right now. That's that's a that's a that's a tough trade to do right now. So we're just gonna keep doing as we have been, which is sort of delta hedging and staying on top, keeping our leverage in check.

1h 11m 58s

And and, you know, adding when we've had a few days of strength and to the extent that we feel more uncertain about things, we [indiscernible] we like to use the leverage lever to really help us manage our risk because we can't ever get away completely away from the risk of of of this portfolio without some volatility and convexity hedging. But we can insulate it through lowering leverage.

1h 12m 30s

Yeah.

1h 12m 30s

Just one final point not to belabor it, but a lot of our use of swaptions is usually driven by attractive entry points into those positions when those present themselves. And sometimes it's just because vol is lower. Sometimes it's because you can do a long and a short.

1h 12m 46s

To get your own all in cost down. That's just really challenging to do right now. We tend to focus on data minimization strategies where we're doing some kind of a spread trade. [indiscernible] putting on a trade that is very highly geared where we have defined kind of a defined risk where we are comfortable losing 100% of our premium but are looking for outcomes that might have you know, eight to 10 x multiples of that premium to the extent that hedge goes our way. These tend to be kind of tail risk type of events. And so it's just tough to put on a tail risk trade when you're in the middle of kind of the tail. Or deep in the tail.

1h 13m 40s

I appreciate all you guys' comments.

1h 13m 42s

Thank you, guys.

1h 13m 43s

Thanks, Eric. Thank you. Our next question or comment comes from the line of Christopher Nolan from Ladenburg Thalmann and Company. Mr. Nolan, your line is now open.

1h 13m 54s

Hey, I'll be short.

1h 13m 56s

It seems I'm really surprised by your comments saying the banks are not coming back into the market because looking at the steepening of the treasury curve, deteriorating commercial real estate asset quality, it would seem to me that the banks naturally be increasing their purchases of MBS. Where am I wrong on that? I know they have in Ginny space. I know that we've seen in structured space in agencies but not, I don't think we've seen a lot in pass throughs, conventional pass throughs. They're there It's just I don't think enough to overwhelm them. What we've seen in money management redemptions and hedge funds redemptions that's, you know, deleveraging. They may as we speak, because mortgages are attractive. But when you look at early April, when you had all the four selling, money managers, a lot of T plus one settle because when they get a redemption, they have to meet it the next day. So they're selling what they can mortgages and treasuries, for t plus one settle. So that over overwhelmed it and that created a very cheap attractive mortgage universe They may be now, but even really in this week, the commentary on mortgage done well this week.

1h 15m 14s

I seen other than Jenny's again, it's some structured product. Yeah. Final question would be, on housing affordability. Question that asked earlier.

1h 15m 26s

Higher property insurance costs are part of it. Some places, you can't even get homeowners insurance. And my question is why hasn't there been more new insurance pools formed? For home insurance because rates are so hard there. [indiscernible] don't know whether Oh, it's really hard. Mean, to me, that's Well, two things. One, the yield book which we all in this space use, updated their model yesterday. One of the changes in the model was to reflect slow prepayment activity of Florida pools because of insurance Insurance is very, very high. I've always been a believer that global warming will manifest itself through that. Given what's happened over the last six months with fires in California, hurricanes here, reinsurance prices are on the moon.

1h 16m 15s

Don't a new pulse. I mean, I think that's a government source from the government. Private capital, to be very expensive. I would think the risk premium associated with entering that business would be very, very high. Whether you believe in global warming or not, there's no question in the last few years between hurricanes, floods and whatever, they're not they're very, very high and the costs are staggering and you have to deal with regulators. You know, look at California where regular when they set insurance rates, it's backward looking based on historical losses versus projected losses. A lot of the high end homes in California are insured by D and O providers, which have staggeringly high premiums and basically what they call retention or deductibles. I think there's gonna be meaningful money brought to the insurance market, it's going to have to come from the government Okay, thank you.

1h 17m 12s

Yep.

1h 17m 14s

Thank you.

1h 17m 15s

Again, ladies and gentlemen, if you have a question or comment at this time, please press I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Cauley for any closing remarks.

1h 17m 35s

Thank you, operator, and thanks everyone for listening in. To the extent that a question comes to mind after the call or if you listen to the replay, and have a question, please feel free to reach out to us at the office. The number is (772) 231-1400 Otherwise, we look forward to talking to you at the end of the second quarter. Thank you.

1h 17m 59s

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.

Key Insights

Q1 earnings were $0.18 per share (up from $0.07 in Q4), with book value at $7.94 per share as of March 31 (down from $8.90 at year-end); total return for the quarter was 2.6% unannualized, and dividends of $0.3636 per share were declared and paid.
The company raised $206 million in capital during Q1, selling 25 million shares above book value; in April, over 1.1 million shares were repurchased at an average price of $6.44, which was accretive to book value.
Portfolio repositioning included significant purchases of higher coupon, shorter duration Fannie Mae securities (5.5%, 6%, and 6.5% coupons), and a reduction in lower coupon assets; leverage ratio was managed down to 7.4 as of late April after asset sales.
Book value declined approximately 8.3% quarter-to-date as of late April, with an estimated book value of $7.28; quarter-to-date total return (including dividend accrual) is 6.8%, but year-to-date total return is negative 4.08%.
Management sees forward gross ROE potential in the high teens to low 20% range given current spreads and leverage, but notes significant market volatility and uncertainty due to tariffs, inflation, and Fed policy; portfolio is positioned for a steeper yield curve with a focus on higher coupon, shorter duration assets hedged with longer duration instruments.

Recent Transcripts

Book value stable, positive net interest income, and constructive outlook for MBS sector.

Income Statement

Revenue

	2020	2021	2022	2023	2024
Revenue	$13M	-$50M	-$241M	-$21M	$54M
Cost of Revenue	$2.6M	$2.7M	$2.9M	$3.1M	$0
Gross Profit	$10M	-$53M	-$244M	-$24M	$54M
Gross Profit %	80%	105%	101%	115%	100%
R&D Expenses	$0	-$0.5	$0	$0	$0

2020

2021

2022

2023

2024

Revenue

$13M

-$50M

-$241M

-$21M

$54M

Cost of Revenue

$2.6M

$2.7M

$2.9M

$3.1M

Gross Profit

$10M

-$53M

-$244M

-$24M

$54M

Gross Profit %

80%

105%

101%

115%

100%

R&D Expenses

-$0.5

Cash Flow

Net Income

	2020	2021	2022	2023	2024
Net Income	$2.1M	-$65M	-$258M	-$39M	$38M
Dep. & Amort.	$0	$0	$0	$0	$0
Def. Tax	$0	$0	$0	$0	$0
Stock Comp.	$244K	$772K	$957K	$1.2M	$553K
Chg. in WC	-$5.1M	-$8.2M	$16M	-$4.3M	$0

2020

2021

2022

2023

2024

Net Income

$2.1M

-$65M

-$258M

-$39M

$38M

Dep. & Amort.

Def. Tax

Stock Comp.

$244K

$772K

$957K

$1.2M

$553K

Chg. in WC

-$5.1M

-$8.2M

$16M

-$4.3M

Balance Sheet

Cash

	2020	2021	2022	2023	2024
Cash	$220M	$385M	$206M	$172M	$309M
ST Investments	$0	$30M	$0	$69M	$101M
Cash & ST Inv.	$220M	$436M	$206M	$178M	$410M
Receivables	$10M	$19M	$12M	$15M	$23M
Inventory	$0	$0	$0	$0	$0

2020

2021

2022

2023

2024

Cash

$220M

$385M

$206M

$172M

$309M

ST Investments

$30M

$69M

$101M

Cash & ST Inv.

$220M

$436M

$206M

$178M

$410M

Receivables

$10M

$19M

$12M

$15M

$23M

Inventory

Go Deeper

Financial information provided by Financial Modeling Prep. Options data provided by Unusual Whales. Live transcripts provided by Quartr. Reported revenue and EPS data from Earnings powered by FinChat.io. All data is provided for informational purposes only, and is not intended for trading purposes or financial, investment, tax, legal, accounting or other advice. · See all tickers.

Overview
Latest News
Earnings
Income Statement
Cash Flow
Balance Sheet
Related

Earnings

Report Date

Apr 24, 2025

Reported Revenue

19.7M

Beat +64.89%

Avg 1d Change

2.41%

Report Period

Q1 2025

Reported EPS

0.16

Miss -11.11%

Implied Move 1d

10.12%

Transcript

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45m 57s

Thanks. Hi, guys. How are doing? Thanks for the time. First of all, can you tell me where you see your duration gap both at the end of the quarter and to date after sales you've made?

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49m 32s

Got it. Thank you for the time.

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52m 17s

But even if you do, I mean, investing at these levels the yield on the stock got don't remember what it was at the lows, I assume mid-20s. When we were trading in the low sixes.

52m 32s

53m 18s

54m 28s

Yeah, that's just slightly different way we different tack we take on how we approach that.

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55m 37s

Right?

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1h 27s

Thank you. Yep.

1h 32s

Thank you. Our next question comment comes from the line of Mikael Goberman from Citizens. Mr. Goberman, your line is now open.

1h 41s

Hey. Good morning, guys. Hope you're doing well.

1h 43s

1h 1m 11s

1h 2m

1h 3m 19s

So we have a little bit of exposure in the premium space, but will also notice the rockets are faster for out of the money borrowers as well.

1h 3m 29s

1h 4m 41s

It's been certainly something to talk about though.

1h 4m 45s

1h 5m 8s

1h 6m 28s

But I don't think we're going to have a huge surge of supply. [indiscernible] totally agree.

1h 6m 36s

Alright, guys. Thank you very much as always and best of luck going forward.

1h 6m 41s

Thanks, Mikael.

1h 6m 43s

Thank you. Our next question or comment comes from the line of Eric Hagen from BTIG. Mr. Hagen, your line is open.

1h 6m 51s

Hey, Eric.

1h 6m 52s

Thanks, guys. How are we doing? Hey. Good to to hear from you guys. I want to ask about whether you think the level of spreads has reset higher, wider as a result of the tariff war?

1h 7m 4s

Like in a scenario where interest rate vol comes down and spreads tighten, like what do you think the level that we could tighten to is and has that level changed?

1h 7m 12s

1h 7m 51s

Like on an OAS basis, versus treasuries, mortgages don't look nearly as compelling as they do versus swaps. That's because treasuries have almost kind of traded like a risk asset here.

1h 8m 4s

1h 9m 33s

1h 9m 51s

So, no, I don't I don't see any catalyst for us materials tightening. The near term.

1h 9m 59s

1h 10m 21s

Well, it's expensive, right? So yeah, that Right. [indiscernible] in February.

1h 10m 28s

Yeah.

1h 10m 30s

1h 11m 58s

1h 12m 30s

Yeah.

1h 12m 30s

1h 12m 46s

1h 13m 40s

I appreciate all you guys' comments.

1h 13m 42s

Thank you, guys.

1h 13m 43s

Thanks, Eric. Thank you. Our next question or comment comes from the line of Christopher Nolan from Ladenburg Thalmann and Company. Mr. Nolan, your line is now open.

1h 13m 54s

Hey, I'll be short.

1h 13m 56s

1h 15m 14s

I seen other than Jenny's again, it's some structured product. Yeah. Final question would be, on housing affordability. Question that asked earlier.

1h 15m 26s

1h 16m 15s

1h 17m 12s

Yep.

1h 17m 14s

Thank you.

1h 17m 15s

1h 17m 35s

1h 17m 59s

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.

Key Insights

Q1 earnings were $0.18 per share (up from $0.07 in Q4), with book value at $7.94 per share as of March 31 (down from $8.90 at year-end); total return for the quarter was 2.6% unannualized, and dividends of $0.3636 per share were declared and paid.
The company raised $206 million in capital during Q1, selling 25 million shares above book value; in April, over 1.1 million shares were repurchased at an average price of $6.44, which was accretive to book value.
Portfolio repositioning included significant purchases of higher coupon, shorter duration Fannie Mae securities (5.5%, 6%, and 6.5% coupons), and a reduction in lower coupon assets; leverage ratio was managed down to 7.4 as of late April after asset sales.
Book value declined approximately 8.3% quarter-to-date as of late April, with an estimated book value of $7.28; quarter-to-date total return (including dividend accrual) is 6.8%, but year-to-date total return is negative 4.08%.
Management sees forward gross ROE potential in the high teens to low 20% range given current spreads and leverage, but notes significant market volatility and uncertainty due to tariffs, inflation, and Fed policy; portfolio is positioned for a steeper yield curve with a focus on higher coupon, shorter duration assets hedged with longer duration instruments.

Orchid Island Capital, Inc. Price & Performance (ORC)

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